U.S. Session Forex Recap – August 16, 2016

Article Highlights

Empire State manufacturing index down from +0.6 to -4.2 vs. +2.1 forecast

U.S. NAHB housing market index up from 58 to 60 as expected

WTI crude oil up 2.81% to $45.74/barrel

S&P 500, DJIA, and Nasdaq close at all-time highs

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A combination of risk-taking and downbeat economic data dragged the safe-haven U.S. dollar lower against most of its counterparts, except for the British pound and Japanese yen.

Major Events:

Downbeat U.S. economic data – The U.S. printed weaker than expected reports at the start of the trading week, leading market participants to ease up on their dollar positions ahead of the release of the FOMC minutes later this week.

The Empire State manufacturing index slid from 0.6 to -4.2, which reflects industry contraction, instead of improving to the projected 2.1 reading. Meanwhile, the NAHB housing market index landed at 60 as expected, but the previous reading was downgraded from 59 to 58.

Stocks and commodities rally – New York session traders woke up at the right side of the bed on Monday with a healthy appetite for risk. U.S. equity indices closed at all-time highs, with the S&P 500 up 0.28% to 2,190.15 and the Nasdaq advancing 0.56% to 5,262.02.

Analysts say that a relatively upbeat turnout for the earnings season and expectations that the Fed could keep borrowing costs low for the rest of the year may have fueled the rallies. Crude oil also climbed on expectations of a positive outcome for next month’s informal OPEC meeting, with WTI crude oil up 2.81% to $45.74 per barrel.

Expectations for post-Brexit U.K. data – The United Kingdom has a bunch of top-tier reports up for release this week and most of these are figures calculated after the EU referendum. This means that market watchers would get a clearer picture of the economy’s immediate reaction to the Brexit decision, likely reflected in weaker figures for inflation, hiring, and consumer spending, so pound traders have begun to make trade adjustments.

Major Currency Movers:

GBP – The pound was still stuck in the losers’ bench as traders started pricing in expectations for the U.K. reports this week.

GBP/USD fell from the 1.2900 handle to a low of 1.2865 (-0.27%), GBP/JPY started of at 130.56 then dropped to a low of 129.95 (-0.47%), EUR/GBP edged higher to test the .8700 handle (+0.35%), GBP/AUD fell below the 1.6800 mark to a low of 1.6763 (-0.22%).

USD – The Greenback was also one of the weakest performers for the day, as the currency got a double-whammy from risk appetite and downbeat U.S. data.

EUR/USD climbed from 1.1172 to test the resistance at the 1.1200 handle (+0.25%), AUD/USD started off at .7666 then rose to a high of .7690 (+0.31%), USD/CAD edged lower to the 1.2900 area (-0.22%), and USD/CHF dropped from .9733 to a low of .9712 (-0.21%).

Every day, I will present to you my findings and daily commentaries on what recently happened in the economic arena, possible shifts in sentiment, economic events to watch out for, and their effects on currencies.

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